“There has been a very stable business environment and good investment climate in India and we have seen solid GDP growth numbers. So, of course, it encouraged India to move up the ranks in terms of investment priorities. If we can create contexts that are more predictable, ideally lower taxes on alcohol for beer, it would make it a very strong case,” Jan Craps, chief executive of Budweiser APAC, the Asia-Pacific business of the company behind the eponymous brand, Corona and Hoegaarden. “We invested $1.5 billion in India over the last decade and if you think about our tax payments, we pay nearly $500 million every year.”
The Belgian drink and brewing company, which produces a fourth of the world’s beers, said India is now the fourth largest market for Budweiser brand globally by volume sales, compared to sixth a year ago after it outpaced Canada and the UK. In India, the contribution of premium brands increased to two-thirds of its total sales compared to a third about three years ago. The brewer has also been focusing on products beyond beer and has launched energy drinks, whisky, spiced rum, vodka and, more recently, gin.
India – a warm, tropical country with promising demographics and increasing affluence – remains one of the largest beer markets for global brewers. But it levies twice the tax on beer than on spirits, in key states such as Karnataka, Maharashtra and Haryana, and there are only 80,000 alcohol retail licences across the country, including for stores, pubs and bars. More than 20 million people enter the legal age for drinking every year in the country. Yet, beer accounts for just 10% of the spirits market, with per-capita consumption of two litres annually in India, lower than most Asian markets.
“In India, excise is actually disproportionately high versus spirits. On average, the tax on beer is 1.8 times the average tax level of whisky which is a big driver why higher alcohol products are consumed more in India,” Craps told ET in an exclusive interaction. “In a few states, we need to wait on our own payments until they sell the beer. And there are some states that allow us to be taxed later, which creates a more favourable business environment to invest and generate positive cash flows.”
United Breweries, which owns the Kingfisher brand, is by far the leader in the beer segment in India, controlling more than half the market while AB InBev is a distant second with about 23% share.In India, strong beer accounts for more than 80% of the total volume and many consumers of strong beer are also potential purchasers of value and low-priced spirits. This cross-category competition makes price – and excise rates – crucial. If regulations push up beer prices, the gap between cheap Indian made foreign liquor and beer closes sufficiently for many consumers to switch, according to the IWSR Drinks Market Analysis report.
